UK - Contract-based pension plans are the least likely to carry out a risk assessment despite previous warnings from the regulator, consultancy firm Watson Wyatt has found.
Only 10% of such plans have conducted a risk assessment in the last 12 months, in comparison to the 32% of standalone trust-based defined contribution (DC) plans and 22% of DC sections of predominantly defined benefit (DB) trusts.
The consultant also states contract-based plans have the furthest to go to improve governance generally, as some 40% of the plans never having reviewed investment fund performance, while almost half have never reviewed their plan provider.
The survey of DC governance practices of 108 DC pension schemes found overall less than 20% of DC schemes carried out a risk assessment in the last year.
"This is a low number given that the Pensions Regulator (tPR) highlighted back in April 2007 the imperative need for those involved in running DC plans to understand the risks involved in DC and for them to take action to mitigate these risks," said Gary Smith, senior DC consultant at Watson Wyatt.
According to Smith, tPR requires DC plans to conduct regulator monitoring and reviews to ensure the scheme is comfortable that all risks are identified.
"We would suggest that any risk assessment should be revisited at least annually to identify changes," he concluded, stressing more improvement is needed.
That said, the survey found that 11% of trustee boards with DC sections within a predominantly DB trust have established specialist DC sub-committee, and 60% of contract-based DC plans now carry out some form of governance, with 34% using a formal monitoring committee.
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